FTC Targets Publisher

The Federal Trade Commission has reached a settlement with a Ramsey, NJ-based company and its owner who were charged in a phony magazine telemarketing scheme.

The settlement calls for National Scholastic Society Inc., doing business as University Society Publishers Periodicals, and its owner, David C. Beasley Jr., to post a $250,000 performance bond before engaging in any telemarketing activities in the future and contains various reporting provisions to help the FTC monitor the compliance.

The FTC and the Attorney General of New Jersey filed a complaint last year in federal district court against Beasley and his company, charging they used fraudulent means to part consumers with their money.

The complaint alleges that when consumers called the toll-free number on a postcard sent by the defendants, they were told they would be entered in a $25,000 cash sweepstakes just for calling. The defendants then pitched magazine subscriptions and told consumers they would receive expensive gifts, including $500 worth of grocery coupons, if they agreed to purchase a subscription.

Company representatives allegedly tricked consumers into revealing their credit card numbers under a variety of guises and then billed their accounts, according to the FTC. Even consumers who did not agree to subscribe were billed for hundreds of dollars. Consumers were told that they could change their minds and cancel their subscriptions, but weren't able to when they tried to. In addition, consumers did not receive the promised coupons, but only forms that they could use to obtain coupons at an additional cost.

The FTC and the State of New Jersey alleged that the defendants violated the Telemarketing Sales Rule (TSR) because the company failed to disclose the odds of winning the prize and didn't allow consumers to cancel.

The FTC filed its charge in May 1997 as part of a crackdown against phony magazine telemarketers in Illinois, New York, New Jersey, Pennsylvania and West Virginia that are using a variety of ruses to bilk consumers out of millions of dollars.

"Fraudulent magazine marketing is certainly a persistent problem. We have seen it come up time and time again," said Liz Grant, a staff attorney at the FTC. She said that the commission is partnering with the Magazine Publishers of America, a trade association in New York, to combat the problem.

Fraudulent magazine telemarketers often offer consumers the chance to receive items like diamond watches or airline tickets for subscribing to magazines, but never make good on the expensive gifts, Grant said. In other instances, fraudulent telemarketers tell consumers that they only have to pay shipping and handling costs, but then bill them for that plus the subscription price.

Sometimes fraudulent magazine marketers tell consumers that they have to pay only $2 a week for a subscription, but fail to inform them that the charges continue each week for a few years, Grant added. Other times, the marketers imply that they have a relationship with the magazine publisher and are renewing consumers' subscriptions, but the consumers later receive two subscription bills - one from the publisher and another from the marketer.